Before you sign on the dotted line for that new addition or outdoor deck with swimming pool, stop and ponder this question: Will it add to the resale value of my home? Or will it just make life more comfortable for me at a cost of so many thousands? Perhaps the second question is more important to you, but knowing that an improvement actually enhances the value of your home will ensure it eventually pays for itself at resale.
Where do you look to find out this information? Professional appraisers suggest applying common sense and looking at some basic factors in determining how much money you’ll get back from a remodeling expenditure. First, compare the project to similar homes in the neighborhood. For example, if you’re adding a bathroom because your home has only one bath while most homes on the block have two or more, then it might make sense to install one. But use some restraint. A luxury $40,000 master bath with sauna, Jacuzzi and his and hers toilet closets might not be the right decision, just because the neighbors have one. Maybe a half-bathroom will suffice.
Along that line, sometimes the cheapest renovations or cosmetic changes can offer the highest returns, especially if you’re planning to sell in the near future and don’t want to overspend. Exterior paint and landscaping improvements, for example, add considerable “curb appeal,” boosting your home’s salability. Basement rec rooms or swimming pools, on the other hand, tend to be losers.
In addition, consider the real estate market’s relative strength in your neighborhood. The chances that people will pay for your remodeling improvements will be higher if homes are selling at good prices. If you’re still uncertain and want an independent opinion, ask a neighbor or real estate agent or get a professional real estate appraiser’s assessment of your particular plan.
Another source of remodeling statistics is the annual “Cost vs. Value Report” published by Remodeling Magazine. This nationwide industry survey measures the possible return on investment for various types of remodeling projects when it comes time to sell. Through a survey of real estate professionals, the report tries to measure how much and how fast the expenditure will add to a home’s resale value.
Just remember this information is industry generated and not verified statistically by any independent source. Some have questioned the statistical accuracy of the information and say the annual survey is fraught with potential conflicts of interest with the remodeling and real estate industries. It’s not a bad place to start, however, as a basis of comparison. Just don’t rely on the specific dollar amounts given as gospel.